China Investment Corporation (CIC), the country's US$200 billion sovereign wealth fund, will not know the total loss on its investment in Reserve Primary Fund until the Fund makes its last cash distribution to shareholders, Caijing magazine reported, citing an unnamed senior manager with the CIC.
Whether or not CIC will file a lawsuit against the US money market fund depends on how big its final loss turns out to be, the unnamed source said.
"As an investor, CIC will need to look at its exact losses before deciding whether to take the Fund to court; after all, lawsuits are expensive," the source said.
Primary Fund is managed by Reserve Management Co., the oldest money market fund in the United States. Investors used to consider money market funds a safe haven until the failure of Reserve Primary Fund. On September 16, the Fund's holdings of US$785 million in Lehman Brothers debt were written down to zero and its net asset value "broke the buck", falling to 0.97 cents per share. Primary Fund investors, including the CIC, all attempted to withdraw their investments, causing the Fund to suspend redemptions.
CIC is reported to have invested US$5.4 billion in the Fund.
On December 3, the Fund announced its second distribution of US$14.4 billion, which represents about 57% of its remaining assets. To date, about 80 percent of Fund assets have been returned to its investors. The Fund hasn't provided any details on when it will return the remaining assets.
"CIC are not just waiting for the final result – we have been in active contact and negotiation with both the US government and our government," the source said.
During the fifth Sino-US Economic Dialogue convened last week, Vice Premier Wang Qishan called on the US government to take measures to guarantee the safety of China's assets and investments in the US.
(China.org.cn by Yan Pei, December 10, 2008)
